Panicked Selling Even Strikes the Gold Market

GLD longs should protect their positions right now.

Over the years, I have noticed that in extreme declines, there is fear of not getting out. Selling anything with a bid to raise cash. The gold market is seeing weakness Thursday morning, when "common sense" might suggest safe-haven buying was in order. Let's look at the charts of the gold exchange-traded fund, SPDR Gold Trust (GLD) , to see what price points to focus on at this juncture in time.

In this daily Japanese candlestick chart of GLD, below, we can see that prices have gapped lower (the Japanese call is a falling window) and tested the rising 50-day moving average line. Trading volume was higher on the early February high than the higher high this month. This is a subtle difference, but it says that buyers were less enthusiastic on the second high. The daily On-Balance-Volume (OBV) line has turned lower and the 12-day price momentum study shows a small bearish divergence with a lower peak from February to March, which is a bearish divergence when compared to the price action. This is not a big divergence, but in today's "sell first and ask questions later" environment, it can be enough to move traders.

In this updated Point and Figure chart of GLD, below, we can see that a trade at $146.49 would be a slight new low and that could precipitate further weakness.

Bottom-line strategy: Sometimes there is no rhyme or reason about the markets. GLD longs should protect their positions.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are prohibited from trading individual securities.

Sector rotation is the name of the game right now and will provide us with some insight as to what lies ahead.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation.
If you have questions, please contact us here.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.